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This Group of Stocks Could Crush the U.S., Even During the 'Melt Up'

By Dr. Steve Sjuggerud
Monday, October 23, 2017

The last time we saw today's setup, one group of stocks more than doubled in four years and left U.S. stocks in the dust...
It has nothing to do with China. And it might surprise you...
European stocks are now dirt-cheap compared with their U.S. counterparts.
Based on history, that means we could see an incredible scenario... European stocks could significantly outperform the overall U.S. market during the next four years.
Don't get me wrong... I am still bullish on U.S. stocks over the next 12 to 18 months. I think they will absolutely soar, thanks to the last explosive phase in this bull market, which I've called the "Melt Up." But Europe could do even better.
Let me share the details...
U.S. stocks crushed European stocks in 2016... The S&P 500 Index soared 12%, while the STOXX Europe 600 Index actually fell 1%.
The U.S. market has been outperforming Europe like this for years. But this outperformance might finally be coming to an end... even as the Melt Up gets going.
You see, U.S. stocks are expensive compared with European stocks today. The chart below shows the premium of the U.S. market versus Europe, based on the price-to-book value ratio.
It's coming off the highest level we've seen in years. Take a look...
The U.S. market is roughly 65% more expensive than Europe right now. That's a massive premium. As you can see above, the last time U.S. stocks were this expensive relative to the U.S. was in 2003.
Surprisingly, that wasn't a bad time to own U.S. stocks... Just because they were more expensive than Europe didn't mean they were set to crash.
In fact, that year turned out to be a great time to own both the U.S. and Europe. U.S. stocks did well from 2003 to 2007... But European stocks absolutely crushed the returns we saw in the U.S. Take a look...
Total Returns
European Stocks
U.S. Stocks

U.S. stocks jumped a total of 42% over this four-year stretch... But European stocks more than doubled.
We could be at the beginning of a similar trend... a multiyear move higher in the U.S. and Europe... with European stocks dramatically outperforming. It's already starting this year...
European stocks are up 24.4% this year, while U.S. stocks are up only 16.3%.
Again, don't get me wrong here. I expect the gains in the U.S. to continue...
The Melt Up should help push the overall U.S. market higher. And certain sectors will absolutely soar – potentially hundreds of percent.
But on the whole, European stocks could outperform during the next few years or so. They're dirt-cheap compared with the U.S. And they doubled in four years the last time we saw an opportunity like today... a massive 100% gain.
If you're interested in owning Europe, the simplest way to do it is through the SPDR EURO STOXX 50 Fund (FEZ).
FEZ holds a basket of Europe's largest blue-chip companies. And while the U.S. will likely soar in the years to come, European stocks – and shares of FEZ – could do even better...
Good investing,

Further Reading:

Steve says European stocks could outperform over the next few years... But he still predicts massive upside ahead as the U.S. market "melts up." Catch up on this big theme right here:

Market Notes

Facebook (FB)... "FANG" stock
Netflix (NFLX)... "FANG" stock
Adobe Systems (ADBE)... Acrobat, Illustrator, Photoshop
Nvidia (NVDA)... chipmaker
Intel (INTC)... chipmaker
Lam Research (LRCX)... chipmaker equipment
Interactive Brokers (IBKR)... online brokerage
Square (SQ)... mobile payments
Bank of America (BAC)... financial-services giant
JPMorgan Chase (JPM)... financial-services giant
Morgan Stanley (MS)... financial-services giant
American Express (AXP)... credit cards
MetLife (MET)... health insurance
UnitedHealth (UNH)... health insurance
AbbVie (ABBV)... prescription drugs
Biogen (BIIB)... biotech
Johnson & Johnson (JNJ)... Band-Aids, Tylenol, Listerine
Abbott Laboratories (ABT)... Pedialyte, Ensure
Dollar General (DG)... discount retailer
Dollar Tree (DLTR)... discount retailer
Restaurant Brands (QSR)... Burger King, Tim Hortons
NVR (NVR)... homebuilder 
Toll Brothers (TOL)... homebuilder
United Rentals (URI)... equipment rental
Cummins (CMI)... diesel engines
Chevron (CVX)... Big Oil
CF Industries (CF)... agricultural fertilizer
Rollins (ROL)... pest control

Party City (PRTY)... party supplies
Bed Bath & Beyond (BBBY)... home goods
Sears Holdings (SHLD)... clothes, tools, appliances
Dick's Sporting Goods (DKS)... athletic goods
Foot Locker (FL)... athletic apparel
Harley-Davidson (HOG)... motorcycles

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